CHINA: Crackdown to cut baijiu profits by one-fifth - survey
Baijiu makers should brace for a 20% drop in profits, at least, as the Chinese Government's corruption crackdown curbs corporate entertainment budgets, according to a new report.
The white spirit, which accounts for 99% of all spirit sales in China, has been hardest hit by the crackdown, according to the DDMA China Market Snapshot Report, released yesterday (22 July). In a survey of 103 corporate firms, 35% said they were buying less baijiu for entertaining compared to 7% who were cutting wine costs and 1% on international spirits.
DDMA said the figures translate to a “minimum reduction” of 20% in the profits of leading Chinese baijiu companies. According to DDMA, 70% of baijiu makers' profits come from corporate expenditure and gifting.
The survey, which was conducted last month, also found that 40% of Chinese companies said they are reducing corporate entertainment expenditure by buying less alcohol.
The introduction of a clampdown on gifting to civil servants and ban on alcohol at luxury banquets, introduced late last year, has hit the performance of drinks compaines in China, including Pernod Ricard and Diageo.
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